In the example below, MF = 0.00373. So APR = 8.95%. However, in the total cost break-down, we have:
Depreciation: $22,864
Rent Charge: $14,537
But a 3-year loan of $22,864 with APR 8.95% will have interest cost much lower than $14,537. Do I miss something here?
Your loan isnât on $22,864.
Rent charge is assessed as (cap cost + rv )* mf = monthly rent, then multiply by lease months to find total rent charge.
(42697+65560)*0.00373 * 36 = 14537, give or take a few bucks, accounting for rounding
Thank you for the explanation.
But why itâs 42697+65560? The RV is 77630*55%, while 65560 is the MSRP - discount.
What do you get when you multiply 77630 and 0.55?
Right, and thatâs what the cap cost is.
And â+â adds those two numbers.
As it should.
Its averaging the value between the adjusted cap cost and the residual value.
The /2 for the average is captured in the 2400
You are paying interest on the average amount of the cap cost and residual value since that is the amount the leasing company is technically lending you over the entire lease term. For example if cap cost is $50k and residual is $30k, the average amount they are financing is $40k. Unlike a traditional loan that has different principal vs. interest amortization (ex. a lot of interest in 1st month and very little in last month) on a lease they calculate the interest on the average and charge the same $$ per month.
Thanks, all!
So it seems that I should not lease the example EV, compared with buying: I have 7500 EV credit savings, but need to pay about 15k rent charge.
Would you finance the car instead, or just consider something different entirely? You should compare total cost - what would interest cost be on a finance, what would resale look like vs. residual on the lease that protects resale downside risk, etc?
Depending on the vehicle and if the tax credit is available on a purchase, it may make the most sense to lease the vehicle and then immediately buy out the lease.
By immediate buyout, we will have to pay the remaining lease payment plus RV, right? If so, isnât it even worse than regular lease?
You do not have to pay unearned rent charge.
Most cases itâs Unpaid Depreciation + RV + Small Fees
Good to know. Then it makes sense to do lease and then immediately buy it out, as long as Volvo Finance allows it.
Volvo allows it, If it was Ally or US Bank you might encounter some obstacles.
Sorry, what is the role of Ally or USB here? You mean get the loan from them for the buyout?
It depends on who owns your Lease Note. If Volvo, itâs easy, if it is owned by Ally or USBank (The lease), they like throwing up obstacles. Your original contract tells you who owns it.
Oh? I thought all Volvo lease are from Volvo Finance. Itâs not always the case?
The lease has the EV credit pass down, so it canât be Ally or USB, right?
